IOSR Journal of Economics and Finance (IOSR-JEF)

e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 6, Issue 3. Ver. I (May.-Jun. 2015), PP 33-38

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The Impact of Cashless Policy on Small Scale Businesses in Ogoni

Land of Rivers State, Nigeria
Igbara, Felix N.1, Emerenini, Fabian M.2, Daasi, Gibson L.K.3
1 & 3 (Department of Banking and Finance, Rivers State Polytechnic, Bori, Rivers State, Nigeria).
2 (Department of Economics, Imo State University, Owerri, Imo State, Nigeria).

Abstract: The purpose of this paper is to examine the impact of cashless policy on small scale businesses. The
study carried out in Ogoni of Rivers state, using the purposive sampling technique, 250 owners and operators of
small scale businesses were selected and administered questionnaire. The data collected were coded and
analyzed using frequency table and percentage, while regression analysis was used to test the formulated
hypotheses using SPSS (Statistical Package for Social Sciences). The results indicate that: small scale
businesses in Ogoni land are predominately occupied by sole proprietorship with meager income with a
significant numbers of them having a very poor banking habit; it was also found out that small scale businesses
statistically do not rely on heavy capital outlay; couple with the fact that provision of services is their main
business activity makes bank transaction, ATMs usage and online banking of less or no significance since their
transaction is grossly hinged on cash and carry basis; the findings from the study also suggest that operators
of small scale business have zero tolerance to ICT usage in both the operations and transactions of their
businesses; and this constitute a major challenge to the adoption of cashless policy in the study area and
generally, there was a negative significant influence of the introduction of cashless policy on the operations and
growth of small scale businesses in Ogoni land. Based on the findings some recommendations among others
made are: the need for government to harness efforts which should be directed at improving the activities of
small scale businesses through concerted policies, regulations and actions that will encourage and empower
small scale businesses financially thereby making the sector vibrant and productively ready to withstand a
cashless economy.
Key words: Cashless Policy, Economy, Impact, Rural development, Small Scale Businesses.

I.

Introduction

There have been a consistent agreement in the body of extant literatures [1][2][3][4][5] that small and
medium scale enterprises have the tendency to improve the economy of any nation through job creation and
increased flow of finance to the economy calls for policy formulation and implementation that will enhance its
growth and performance. However, the recent introduction of cashless policy by the central bank of Nigeria
(CBN) has relegated SMEs to a characterization of what is described as the declining glory of the sector. This is
evident in SMEs performance, growth and operation, especially in rural Ogoni land.
The situation is more disturbing when compared with what other sectors (with lesser economic
implication) of the economy has been able to achieve. Studies have also described the situation by showing a
high correlation between access to finance and operations, performance and growth of SMEs. Hence, if the
goals of SMEs which is widely acclaimed by researchers [6][7][8][1][2][3] as a boast to the economy will be
achieved, then the development and enhancement of the performance, operations and growth of SMEs should be
vigorously pursued.
The growth of SMEs in Ogoniland and anywhere else is a product of availability of finances and
effective utilization of mechanism which enhances their performance, operation and growth in terms of
execution of transaction. Thus, inability to accomplish the foregoing could hinder the growth of SMEs
especially with the recent introduction of cashless policy which calls for internet and online banking, the use
Automated Transfer Machine (ATMs), etc., makes the situation even more disturbing for SMEs especially those
operating in the rural areas due to the proximity, lack of awareness and knowledge, access to Information and
Communication Technology (ICT) [9][10][11][12][13][14].
The description of SMEs as a business that utilize average trading capital and the largest number of
participant operating as the lowest strata of the economy, could make the introduction of the cashless policy not
only a plaque to the operators, but also a burden to the economy. The problem of this study therefore, is to
investigate if the introduction of cashless policy has any impact on Small scale business in Ogoni Land.
The objective of this paper therefore is to examine the impact of cashless policy on Small scale
businesses in Ogoni Land. Specifically, emphasis will be placed on: determining the characteristics of small
scale businesses in the study area; identifying the challenges that have hindered the adoption of cashless policy
by small scale businesses in the study area; investigating if cashless policy has in any way enhanced the growth
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The Impact of Cashless Policy on Small Scale Businesses in Ogoni Land of Rivers State, Nigeria
of small scale businesses in the study area; examining the impact of cashless policy on the performance of small
scale businesses in the study area and finally, make evidence-based recommendations on how the adoption of
cashless policy could be enhanced in other to reposition small scale businesses to boast the economy of the
study area and Nigeria.

II.

Methodology

Research design: This study adopted the survey method design to meet its purposes. According to [15][16],
surveys describe current conditions or attitudes as well as explain the reason for certain existing situations. The
survey design is considered appropriate because it has the advantage of effectiveness in obtaining information
about personal perceptions, belief, feelings, motivations, anticipation and future plans as well as past behavior.
The survey was carried out through the administration of questionnaire on owners and operators of small scale
businesses in the study area. In the context of this study, the researcher sought to examine the impact of cashless
policy on small scale businesses in Ogoni land. These populations (owners and operators of small scale
businesses) represent some of the key players in rural economy and they are capable of giving relevant
information that will be useful for the study.
Sample procedure: The purposive sampling procedure was used to select the sample for this study. This was a
pointer to the fact that the study population (owners and operators of small scale businesses) have no definite
statistics with regards to its population. Hence, 250 small scale businesses were selected, and their owners
responded to the research questionnaire.
Method of data analysis: this study adopted the regression analysis to analyze the data with a view to
determining the impact of cashless policy on small scale businesses. The regression is implemented with the
quantitative statistical software called SPSS (Statistical Package for Social Sciences). The decision criteria are
that if the critical f-ratio is greater than the calculated f-ratio at 1 and 248 degree of freedom with 0.05 level of
significance followed by a 95% confidence interval for the mean, the conclusion is that we retain the null
hypothesis (Ho) and discard the alternative hypothesis (Hi).
The model for analyzing the impact of cashless policy on small scale businesses in the study area is
denoted as follows:
Y = a +b1X1
(1)
Where y = dependent variable
a = constant
b1= coefficient of X1
X1= independent variable (explanatory variable)
Based on the equation, we derive the model for this analysis.
OSME = f(CP) (2)
Expressing equation (2) in linear functional form,
OSME = ao+a1 CP + et
(3)
Where, OSME = Operation of SMEs
ao = constant
a1
= coefficient of CP
CP = Cashless Policy
et
= Error term*
Following equation (2), we develop the model for influence of cashless policy on growth of small scale
businesses as;
GSME = f(CP) (4)
With a linear relationship such as
GSME = Growth of SMEs
1
= Constant
2
= Coefficient of CP
CP = Cashless Policy
et
= Error term*
* This takes care of other variables that were not included in the study.

III.

Data Analysis And Interpretation And Discussion Of Results

A total of 250 small scale businesses were administered questionnaire. The result of this study is
divided into four groups; characteristics of small scale businesses; challenges of small scale businesses in
adopting cashless policy; influence of cashless policy on operations of small scale businesses and influence of
cashless policy on growth of small scale businesses. The following sections thus present the study findings:
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The Impact of Cashless Policy on Small Scale Businesses in Ogoni Land of Rivers State, Nigeria
3.1 Characteristics of Small Scale Businesses
The result on the ownership and registration status of SMEs in Ogoni land as shown in table 1 below
indicates a high level of non-registration of businesses with corporate affairs commission (CAC) and sole
proprietorship (76%). This indicates a low level of income which characterized such enterprises, couple with the
confirmation in extant studies [17][18][19][20] that rural areas (including its economy) is marked with a high
level of poverty or low income. Hence, the introduction of cashless policy as implemented by the central bank
of Nigeria (CBN) in the rural areas could hinder SMEs performance, operation and growth, with a significant
negative influence on total turnover on investment and the national economy.
Result of the financial institution that SMEs uses show a very high (76%) rate of non-usage of formal
financial institution, with very low (24%) patronage to formal financial institutions (commercial and micro
finance bank). This could inform poor attitude towards adopting and accepting cashless policy in the area and
anywhere else.
Table 1: Characteristics of SMEs in Ogoni land (N=250)
1

Variables
Ownership

Liability/Registration with CAC

Bankers

Main Business Activity

Main Transactions Channel

Staffing

ICT Application*

Characteristics
Sole proprietorship
Partnership
Joint Stock
Total
Public Limited Liability
Private limited Liability
Un-Registered
Total
Commercial Bank
Micro Finance Bank
No Banker
Total
Whole sale
Retail
Manufacturing
Services
Total
Cash Transactions
Point of Sales
Transfer/Cheques
Web Based
Total
Full-time staffing
Contract Staffing
Total
Web sales/Purchases
Accounting
Online adverts
None
Total

No
190
36
24
250
24
36
190
250
24
89
137
250
21
91
11
127
250
220
3
27
0
250
189
61
250
12
101
50
93
256

%
76
14.4
9.6
100
9.6
14.4
76
100
9.6
35.6
54.8
100
8.4
36.4
4.4
50.8
100
88
1.2
10.8
0
100
75.6
24.4
100
4.6875
39.453
19.531
36.328
100

Source: Study Result, 2014; Multiple Responses

Data in table 1 above further reveal that the main business activities of SMEs in the study area is
mostly services accruing a little above half of the total numbers of SMEs in Ogoni land (50.8), while other
SMEs which constitutes approximately 49.2 percent are variously engaged in wholesale, retail and
manufacturing respectively. This result dose not has any indication for evaluating the impact of cashless policy,
but rather affirms that SMEs is a boast to rural enterprise in Ogoni land.
The result of the main transaction channels SMEs as shown in table 1 above indicates a zero web based
transaction; 1.2 percent point of sales transaction; 10.8 percent transfer/cheque transaction and a very high
percent (88%) of cash transaction channel. This result suggests that the main channel of transaction by SMEs is
cash based. Hence, adopting the cashless policy could hinder its growth and performance, thereby affecting the
rate of total turn-over on investment as well as the economy at large.
3.2 Challenges of Small Scale Businesses
Data in Table 2 below shows some of the challenges that SMEs faces in adopting cashless policy in
Ogoni land. The decision rule for the challenge to be significant, indicate that the mean rating must be 2.5 and
above, while challenges that rate less than 2.5 were ruled not significant. The result from the challenges of
SMEs in adopting cashless policy indicate the following as some of the challenges of SMEs in adopting cashless
policy: lack of ICT knowledge, Non-availability of ICT, fear of online fraud, Non-availability of POS, distance
of ATMs, cost of internet, unreliable networks, low income and ICT phobia.
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The Impact of Cashless Policy on Small Scale Businesses in Ogoni Land of Rivers State, Nigeria
Table 2: Mean Rating of Challenges of Adopting Cashless Policy by SMEs in Ogoni Land
Variable
Lack of ICT knowledge
Non-availability of ICT
Fear of online fraud
Non-availability of POS
Distance of ATMs
Cost of Internet
Unreliable Networks
Low income
ICT Phobia
Protocols in Cheque Liquidation
Fear of Stale Cheques

N
250
250
250
250
250
250
250
250
250
250
250

X
3.2920
3.0760
3.2720
2.8720
2.9800
3.2120
3.0440
2.9240
2.0720
1.9960
1.9280

SD
.65149
.58617
.57212
.49049
.60420
.64554
.55434
.55085
.64846
.50299
.55502

Remarks*
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Not Significant
Not Significant

Source: Study Result, 2014; *Significant value, X = 2.50 and Above.

Similarly, the result based on the data in table 2 above revealed that protocols in cheque liquidation and fear of
stale cheques with mean rating of 1.9960 and 1.9280 were not considered a challenge in adopting cashless
policy by SMEs in Ogoni land. This result is supportive evidence [2] that the rural areas are characterized with
low income, and also, a significant numbers of the SMEs operating in the area support the Osusu system
(informal financial institutions) operating outside the scope of banking laws and regulations including ROSCA
[Rotatory Savings and Credit Association], FISCA [Fixed Savings and Credit Association], TELETU [in Ogoni
translation], MB [Mobile bankers], and IML [Individual Money Lenders].
3.3 Influence of Cashless Policy on Operations of Small Scale Businesses
Table 3: Regression Analysis of Influence of Cashless Policy on Operations of SMEs
Source of Variation
Regression
Residual
Total
(Constant)
Cashless Policy
Source of Variation
Regression
Residual
Total
(Constant)
Cashless Policy

Sum of Squares
.120
349.980
350.100
Coefficients a
18.934
-.012
Sum of Squares
.120
349.980
350.100
Coefficients a
18.934
-.012

Df
1
248
249
Std. Error
.668
.040
Df
1
248
249
Std. Error
.668
.040

Mean Square
.120
1.411

F
.085

Sig.*
.771b

Beta

T
28.344
-.292
F
.085

Sig.
.000
.771
Sig.*
.771b

T
28.344
-.292

Sig.
.000
.771

-.019
Mean Square
.120
1.411
Beta
-.019

Source: Study Result, 2014; P>0.05; df 1,248; Critical F = 3.89

The data in table 3 table shows that degree of freedom 1 and 248, under 0.05 level of significance, the
critical f-ratio is 3.89 and it is greater than the calculated f-ratio of 0.085. The significant level of the f-ratio of
0.085 is 0.771 and is greater than the significance level of 0.05, denoting 95% confidence used for the study.
Hence, we retain the null hypothesis of no significant influence of cashless policy on operations of SMEs in
Ogoni land. In other words, we reject the alternative hypothesis, namely, that the introduction of cashless policy
will enhance the operations of SMEs in Ogoni land. Thus there is qualified evidence which suggest that there is
a significant relationship between cashless policy and the operations of SMEs in the study area.
3.4 Influence of Cashless Policy on Growth of Small Scale Businesses
Table 4: Regression Analysis of Influence of Cashless Policy on Growth of SMEs
Source of Variation
Regression
Residual
Total
(Constant)
Cashless Policy

Sum of Squares
.375
338.025
338.400
Coefficients a
18.578
.021

Df
1
248
249
Std. Error
.656
.040

Mean Square
.375
1.363

F
.275

Sig.
.601b

Beta

T
28.299
.524

Sig.
.000
.601

.033

Source: Study Result, 2014; P>0.05; df 1,248; Critical F = 3.89

The data in table 4 table shows that degree of freedom 1 and 248, under 0.05 level of significance, the
critical f-ratio is 3.89 and it is greater than the calculated f-ratio of 0.275. The significant level of the f-ratio of
0.275 is 0.601 and is greater than the significance level of 0.05, denoting 95% confidence used for the study.
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The Impact of Cashless Policy on Small Scale Businesses in Ogoni Land of Rivers State, Nigeria
Hence, we retain the null hypothesis of no significant influence of cashless policy on growth of SMEs in Ogoni
land. In other words, we reject the alternative hypothesis, namely, that the introduction of cashless policy will
enhance the growth of SMEs in Ogoni land. This result suggests that the introduction of cashless policy will
hamper the growth of SMEs in the area. This is a pointer to the fact the amount available to SMEs (as shown in
table 1 characteristics of SMEs), is relatively meager as what is obtained in the urban areas; couple with the
relatively low usage of ICT, web based and online financial transactions (also see table 1 and 2 above for
details).

IV.

Discussion Of Findings

The result indicates that small scale businesses in Ogoni land are predominately occupied by sole
proprietorship with meager income (Table 1) with a significant numbers of them having a very poor banking
habit (table 1). As evidenced from data in table 1 above, SMEs statistically do not rely on heavy capital outlay;
couple with the fact that provision of services is their main business activity makes bank transaction, ATMs
usage and online banking of less or no significance since their transaction is grossly hinged on cash and carry
basis. This can be affirmed in a study by [1] on traditional financial institutions (TFIs) and rural enterprise in
Ogoni land of Rivers state.
The findings from the study also suggest that operators of small scale business have zero tolerance to
ICT usage in both the operations and transactions of their businesses; and this constitute a major challenge to the
adoption of cashless policy in the study area (Table 2). This makes the adoption of cashless policy to small scale
businesses an activity for the future. However, availability of ATMs and ICT capacity building of SMEs
operators could bring the future to present.
Generally, there was a negative significant influence of the introduction of cashless policy on the
operations (see table 3) and growth (see table 4) of small scale businesses in Ogoni land. This is evidenced to
the fact that a paradigm shift to the application of ATMs, online transaction , distance to ATMs etc., couple with
the low knowledge of ICT by operators of SMEs could hinder their operation and growth, thus, leads to low
Total Turn-over on Investment (TTI), as well as slow rural economic ventures in Ogoni land.

V.

Conclusion And Recommendations

The implication of the findings from this study is that the introduction of cashless policy has a negative
significant influence on the operation, performance and growth of small scale businesses in Ogoni land. The
results of the study revealed that the characteristic of small scale businesses is a strong indicator for measuring
the level of adoption of cashless policy was statistically low. Generally, the characteristics of small scale
businesses in Ogoni land do not support the adoption of cashless policy in the area (see table 1 and 2). This
study therefore opines that small scale businesses do not rely on heavy capital; hence, the introduction of
cashless economy could be a hindrance on its operations and growth.
Based on the studys findings, the following suggestions are discernable:
i.
Low capital by small scale businesses have been implicated as a bane on the adoption of cashless policy.
Therefore, there is need for government to harness efforts which should be directed at improving the
activities of small scale businesses through concerted policies, regulations and actions that will encourage
and empower small scale businesses financially thereby making the sector vibrant and productively ready to
withstand a cashless economy.
ii.
Low based ICT knowledge was implicated as one of the challenge of adopting cashless policy. Hence, there
is need to build capacities in small scale businesses operators through adult literacy programme, seminars,
and mass ICT training programmes in rural areas. This will ensure readiness to go cashless, and also
enhance personal abilities for cashless transactions.
iii.
There is need to build synergy between formal/informal financial institutions, and operators of small scale
businesses. This will consolidate a more effective working relationship which could boast rural small scale
businesses capital based, ensure high turn-over in investment, as well as address the challenge of lack of
trust to utilize internet banking transactions.

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